Principles of Insurance
Principles of Insurance FIN 360
Cal State Fullerton
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This 5 page Class Notes was uploaded by Mr. April Weber on Wednesday September 30, 2015. The Class Notes belongs to FIN 360 at California State University - Fullerton taught by Xiaoying Xie in Fall. Since its upload, it has received 37 views. For similar materials see /class/217011/fin-360-california-state-university-fullerton in Finance at California State University - Fullerton.
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Date Created: 09/30/15
CHAPTER 1 Risk in Our Society Lecture 2 WHAT IS RISK De nition of Risk Objective Risk Subjective Risk PERIL AND HAZARD Peril Hazard Physical hazard Moral hazard Attitudinal Morale hazard Legal hazard BASIC CATEGORIES OF RISK Pure and Speculative Risk Diversi able Risk and Nondiversi able Risk Financial risk MAJOR PERSONAL RISKS AND COMMERCIAL RISKS Personal Risks Risk of premature death Risk of insuf cient income during retirement Risk of poor health Risk of unemployment Property Risks Direct loss Indirect or consequential loss Liability Risks Commercial Risks Property risks Liability risks Loss ofbusiness income Other risks BURDEN OF RISK ON SOCIETY In 157 CHAPTER 3 PPT Lecture 2 3 4 Introduction to Risk Management Lecture 2 MEANING OF RISK MANAGEMENT De nition of Risk Management Loss Exposure Enterprise Risk Management OBJECTIVES OF RISK MANAGEMENT 1m Preloss Objectives Postloss Objectives RISK MANAGEMENT PROCESS Four steps of Risk Management Lecture 3 IDENTIFY LOSS EXPOSURES Types of potential losses Tools for recognizing loss exposures Risk analysis questionnaires and checklist Physical inspection Flow charts Financial statements Historical loss data Contract Analysis MEASURE AND ANALYZE THE LOSS EXPOSURES Loss frequency Loss severity Maximum possible loss Probable maximum loss Risk evaluation methods Risk Mapping or Risk Pro ling Array Risks in a matrix Statistical method Coef cient of Variation Value at Risk VaR Accuracy of Predictions Risk pooling Law of Large Numbers Lecture 4 RISK MANAGEMENT TECHNIQUES Risk control Avoidance Loss prevention Loss reduction Decisions Regarding Loss Control Potential Bene ts of Loss Control Potential Costs of Loss Control Risk nancing Retention Active retention vs passive retention Determining retention levels Paying losses Captive insurer Selfinsurance Risk retention groups Advantages and disadvantages of retention Noninsurance transfers Transfer of risk by contracts HoldHarmless Agreements Forms of HoldHarmless Agreements Incorporation of business Hedging Commercial insurance Advantages of insurance Disadvantages of insurance IMPLEMENT AND MONITOR THE RISK MANAGEMENT PROGRAM The steps for selecting among available risk management techniques Guidelines for Using Different Risk Management Techniques Market Conditions and the Selection of Risk Management Techniques Deductible Decision Implement and Monitor the Risk Management Program T Chapter 2 PPT lecture 5 Insurance and Risk REQUIREMENTS OF AN IDEALLY INSURABLE RISK Large number of exposure units Accidental and unintentional loss Determinable and measurable loss No catastrophic loss Calculable chance of loss Economically feasible premium Chapter 9 PPT lecture 5 Fundamental Legal Principles PRINCIPLE OF INDEMNITY Actual cash value rule Exceptions to the principle of indemnity PRINCIPLE OF INSURABLE INTEREST What Constitutes Insurable Interest Property insurance vs life insurance When the Insurable Interest Must Exist Property insurance vs life insurance PRINCIPLE OF SUBROGATION Reasons for Subrogation Exceptions to the Principle of Subrogation PRINCIPLE OF UTMOST GOOD FAITH Representations Concealments Warranties REQUIREMENTS OF AN INSURANCE CONTRACT Requirements of All Valid Contracts SPECIAL CHARACTERISTICS OF INSURANCE CONTRACTS Aleatory Contract Unilateral Contract Conditional Contract Personal Contract Contract of Adhesion ASYMMETRIC INFORMATION IN INSURANCE MARKET Adverse Selection De nition Solutions to adverse selection Moral hazard De nition Solutions to moral hazard PPT lecture 6 not included in the rst midterm Chapter 10 PPT lecture 6 Analysis of Insurance Contracts DECLARATIONS THE INSURING AGREEMENT Named Perils versus All Risk open perils Agreements EXCLUSIONS Excluded Perils Excluded Losses Excluded Property Excluded Locations COMMON POLICY CONDITIONS BASIS OF RECOVERY Actual Cash Value Replacement Cost CLAUSES LIMITING AMOUNTS PAYABLE Dollar Limits Deductibles Straight Deductible Aggregate Deductibles Coinsurance Operation of the Coinsurance Clause in property insurance Time Limitations Other Insurance Clauses ProRata Clause Equal Shares Excess and Primary Coverage Other Insurance Prohibited
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